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Stop Foreclosure... Save Your House and Your Credit

No one needs to remind you that Foreclosures are at a 30 year high or that nearly 5 million people have lost their jobs since Obama became president.

The old saying What goes up must come down applies to a soaring real estate market that was sometimes unrealistically over priced. Alan Greenspan refused to utilize the Feds power to rein in the sub prime perpetrators arguing that the damage from a boom and bust would be less than the damage from regulating the banks. It is now quite obvious that decision was irresponsible and lame. This was like asking Americans to play football without referees. Maybe Greenspan thinks 5 million foreclosures is an acceptable price to pay?

Sellers were delighted when they continued to get their inflated prices over the past few years, many homes sold with multiple offers that bid the home prices up usually to an artificially high level. Consequently, we are having a sharp downward readjustment of prices that may last for the next few years. As an example, it is estimated that 12 to 15 percent of Californians will sell their homes at a loss in 2009, up from the 2.5 percent just a year ago in 2008. Nationwide the trend is becoming evident.

Stated income, a loan qualifying practice in which the borrower did not need to provide the lender with proof of income, was commonly used and abused by both borrower and lender alike. Such practices were encouraged by Barney Frank and Christopher Dodd both of whom took large contributions from Fanny Mae and Freddie Mac and obtained mortgages below the going rate. Many in the lending industry call Stated Income Liar Loans, that have impacted the lenders, borrowers, investors and the economy.

P.T. Barnum, the famous man of the circus once said: A Sucker is born every minute. It now appears that the American taxpayer is being suckered into more government handouts, and more corporate welfare. It is time to throw the lending criminals behind bars not rescue them at taxpayer expense.

If you are presently in foreclosure, or headed in that direction, be assured that you are not alone. Tens of thousands of homeowners every day will find themselves in this awful situation, many times not of their own making, but due to ill informed buying decisions and possible immoral dealings of unscrupulous mortgage brokers.

There are a number of ways to approach a Default Notice, panic is never the right one. Not opening your mail or returning phone calls to your lender is also not wise. In this financial meltdown keep in mind the lender is not in the real estate business and therefore is not interested in owning your home. When a lender forecloses and takes your home back they are stuck with the property and it will cost them thousands of dollars to get it resold. In fact, for a lender to continue to receive money from the federal government they are permitted to write 5 new loans for every one repossessed property they resale.

With the current and building backlog of bank owned property across the nation you can understand how this inventory can impact future loans to those who are qualified to buy but cannot get a loan during this kind of logjam.

Owners facing foreclosure have several options. Loan modification is the new buzz word around Washington these days, a process in which lenders are being encouraged to reduce the interest rate on a loan for a 5 year period giving the homeowner a breathing space, then the loan amount goes back to its original rate. Not everyone will qualify for these modifications as tax returns, pay stubs and bank records are required to show that your payment exceeds the 31 percent ratio. You still need to prove you are capable of making payments.

Mitigation is another approach in which the lender agrees to change the rate and possibly the amount of the loan, or extend the loan period from 30 to 40 years and in some cases delay payments for a few months time. These are more difficult to get.

Next is Short Sale. In a Short Sale the homeowner gets to walk away, but receives no proceeds from the sale. The lender agrees to sell the property for less than is owed on the mortgage, usually accepting about a 15 to 20 percent reduction. Your credit is damaged but not to the extent of a foreclosure that impacts your credit score for seven years. The Short Sale requires a hardship letter such as loss of employment, divorce, death of a spouse, medical problems etc. Again not everyone qualifies for these loan adjustments nor do they have a real hardship other than the fact that they are short of cash and are having trouble making ends meet.

It is always wise when it becomes obvious that you are not going to be able to stay in your home that you act quickly. Call in a real estate professional to assess you situation and try to find a solution. Lenders, surprisingly are in somewhat the same position, so negotiating a win/win is in the best interest of everyone.

Seed Newsvine

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